Dáil Éireann Debate, Thursday - 18 May 2017
3. Deputy Michael McGrath asked the Minister for Finance the position regarding the independent impact assessment on the help-to-buy scheme as introduced as part of budget 2017; the number of approved applications to date; the cost of the scheme to date; the number of persons yet to be approved; his views on whether the €50 million estimate is sufficient; and if he will make a statement on the matter. [23772/17]
Amharc ar fhreagraThis question relates to the help-to-buy scheme for first-time purchasers of new houses, which was introduced in the budget last October. I seek an update on the number of approved applications, on whether the estimated cost of the scheme at €50 million has changed, given the number of applications was higher than the Minister expected, and on the independent impact assessment he has committed to, which went out to tender some weeks ago.
As the Deputy will be aware, during the Committee Stage debate on the Finance Bill 2016, I agreed to commission an independent impact assessment on the effects of the help-to-buy incentive for completion prior to budget 2018. Following a competitive tender process, Indecon Economic Consultants were appointed in April to undertake this impact assessment.
This purpose of this project, in general, is to assess whether the policy objectives on the supply of new homes are being met, what impact, if any, the scheme is having on new and second-hand house prices, and what impact the scheme is having on the residential property market generally. It is expected that the assessment will be completed and submitted to me by the end of August.
In response to the Deputy's queries concerning the uptake and cost of the incentive, there are two stages involved in the help-to-buy process. Stage 1 is the application stage, wherein prospective applicants can query whether they qualify for the incentive. They can also get clarity on the maximum amount of rebate they could potentially benefit from, based on their tax paid in a four-year period. Stage 2 is the claims stage, wherein applicants that decide to proceed with purchasing or building a qualifying property must provide documentary evidence of the relevant property transaction or their mortgage drawdown.
As of Thursday, 11 May 2017, Revenue had received 6,084 applications to stage 1 of the help-to-buy incentive, of which 3,621 have been approved. However, it is possible that many of these applicants may never make a claim to stage 2 for a variety of reasons. These could include individuals who do not go on to obtain mortgage approval, who may decide to purchase a second-hand property, or who are not able to source the new home that they desire.
To date, 1,677 stage 2 claims have been made, of which, 1,154 have been approved, at a total estimated cost to the Exchequer of just over €17 million. This cost covers almost 70% of the stage 2 claims made to date. Using this as a base, it could be estimated that a further €5 million remains outstanding in respect of these claims. This would bring the cost to just over €22 million, which relates to the scheme being available in respect of relevant homes over an 11-month period. Given that just over seven months remain in 2017, my officials estimate that the cost of the incentive this year will largely be in line with the original estimate of €50 million.
I thank the Minister his reply and for the updated numbers. There have been more than 6,000 stage 1 applications, with in excess of 3,600 approved and 1,677 completed at a cost to date of €17 million with applications worth €5 million in the system, giving a total of €22 million. The cut-off date was 19 July 2016. The Minister seems to be saying the cost is likely to come in line with the budget estimate of €50 million for this year but we can revert to that issue.
I welcome the fact that the Minister has honoured his commitment to conduct an independent assessment to examine the impact of the scheme on the supply of new homes, the prices of new homes and the market generally. Many independent commentators, who do not have any skin in the game, have raised a concern that the scheme is directly pushing up prices, which is not what the Government should want. Can the Minister clarify his own view at this stage? Has he evidence of the scheme putting upward pressure on prices? Does he believe that is the impact it is having?
No, we have all agreed several times that the problem with housing relates to supply. The supply of houses is not sufficient to meet demand. Housing demand is not a lot of people who want houses; housing demand is a lot of people who want houses and can put the money up to buy them. It is much more likely that the hugely increased activity in the mortgage market is contributing to the additional demand driving up prices than anything in the help-to-buy scheme. A sum of €22 million is neither here nor there as an injection over an 11-month period into house purchasing. If that is compared to the billions of euro that have been authorised in mortgages, the Deputy can see the relativities. There is no doubt that additional money leading to money demand tends to drive up prices but the amount provided under the help-to-buy scheme is relatively small in comparison to the credit and savings available in the market. There is significant increased money demand for houses now. The scheme is working as intended but we will know when I get the report back from Indecon, which I will share with Deputies.
A number of issues arise but one issue that is not often mentioned is the impact on non-first-time buyers. The combined impact of the scheme and the 20% deposit requirement disadvantage these buyers when it comes to buying a new home. First-time buyers require a 10% deposit for a €400,000 house, which is €40,000, and they can get half that under this scheme. Their deposit, therefore, is €20,000. Non-first-time buyers require a 20% deposit, which is €80,000, but they cannot access the scheme. That is a significant distortion of the market. That is not entirely down to the scheme as the Central Bank imposes different deposit requirements. However, these important issues are having an impact on families. I welcome that the Indecon assessment is under way and will be completed by late August. I trust the Minister's successor will share that with the Oireachtas in order that we can have a fuller debate in the lead-up to the forthcoming budget.
I can confirm that is the intention.
We will move on to Question No. 4 in the name of Deputy Pearse Doherty. We will come back to his Question No. 2 at the end of Priority Questions.
